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23. Section 5 of the Central Sales Tax Act, 1956, enacted in pursuance of the power conferred by amended Clause (2) of Article 286 lays down the principles for determining when a sale or purchase takes place in the course of import or export. Section 5(1) : "A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India." Sub-section (2) relates to import and need not be set out.

24. The two relevant criteria therefore that mark a transaction hit by Article 286 are : (i) where a sale or purchase occasions an import into or an export out of the territory of India, and (ii) where a sale or purchase takes place after the goods have crossed the customs barriers of India by transfer of shipping documents. In Wadeyar v. Daulatram Rameshwarlal [1960] 11 S.T.C. 757 the Supreme Court held as follows:

If, in respect of a sale, the property in the goods passes to the buyer after the goods have, for the purpose of export to a foreign country, crossed the customs frontier, the sale is said to have taken place 'in the course of export' and is therefore exempt from taxation under Article 286(1)(b) of the Constitution.

29. The terms of the contract read along with the evidence of the manager of Gordon Woodroffe show that the property in the goods passes only beyond the customs frontier and not before. Neither the fact of delivery of the goods by Kovai Tanned Leather Co. in the godown of Gordon Woodroffe and Co., nor the fact of the bill of lading having been taken in the name of Gordon Woodroffe would have the effect of passing the property within the State. The advance received by the petitioner is treated as a loan and not as part payment of the price. Indeed the consigned goods constitute security in favour of Gordon Woodroffe and Co. for the amount of the loan advanced. This can only mean that the property in the goods remained with the petitioner till the goods were put on board the ship. The Appellate Tribunal took the view that because Gordon Woodroffe and Co. themselves transported the goods through the customs barrier and placed them on board the ship and obtained the bill of lading, there could be no question of the property in the goods passing to the buyer after the goods had passed through the customs barrier. We are unable to appreciate the soundness of this reasoning. The purchase was made by Gordon Woodroffe either for an undisclosed foreign principal, or for the purpose of resale in the foreign territory. The real question for consideration is whether the sale is in the course of export. It cannot be presumed that Gordon Woodroffe became the owner of the goods, by reason of the delivery in their godowns within the customs frontier or by reason of the bill of lading having been obtained in their name. As pointed out by this Court in Gandhi Sons Ltd. v. Slate of Madras [1955] 6 S.T.C. 694 two views are possible as to the inference to be drawn from the goods being consigned in the name of the buyer. " One is that the seller reserves the jus disponendi in himself till the documents are presented to the buyer and the payment is made. That is the case which is provided by Section 25(3) of the Sale of Goods Act. The other is that the property passes immediately and the seller retains possession of the bills only for the purpose of claiming a lien on the goods to secure payment of the price, he having parted with the property in them. That the first of the above alternatives is the normal rule would appear to be favoured by the judgment of the Supreme Court in Commissioner of Income-tax, Madras v. Mysore Chromite Ltd. [1955] 27 I.T.R. 128. A proper interpretation of the terms of the contract in the present case leads us to the conclusion that the property in the goods forming the subject-matter of the contract between the petitioner acting through Kovai Tanned Leather Co., and Gordon Woodroffe and Co., passed only beyond the customs frontier and that the transaction is one in the course of export.